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Hold off Minn. tax filing until new cuts sorted out, state officials say

Revenue Commissioner Myron Frans discusses changes to the state's tax code at a news conference on Monday, March 24, 2014. He's asking people who benefit to wait until April 3 to file their taxes.Tom Scheck / MPR News

Officials with the Minnesota Department of Revenue are taking the unusual step of telling some Minnesotans to wait before filing their taxes.

Thanks to a $443 million tax cut bill that Gov. Mark Dayton signed into law on Friday, as many as 270,000 taxpayers will receive retroactive tax cuts. The bill aligns state tax deductions and credits with those in the federal tax code.

At a news conference on Monday, state Revenue Commissioner Myron Frans said anyone who benefits from the tax changes should wait to file taxes until April 3. The reason for the request is simple: The Minnesota Legislature took so long to pass the bill that taxpayers are now up against the April 15 filing deadline.

That means 2013 paper tax forms are now out of date and current tax software needs an update.

Frans acknowledged that such a request is rare, but he said those who elect to wait will receive refunds faster.

"About one in 10 taxpayers will probably be able to benefit from these tax changes this year," he said.

State revenue officials say people in 10 categories should check to see if they need to wait to file. They include people who qualify for the federal Working Family Credit, people who pay mortgage insurance, educators, people who took a loss on the sale of a home and people who have student loans. Taxpayers who are not eligible for deductions can file at any time.

Frans said his department is working with other software vendors like TurboTax to ensure the changes are incorporated by next week. But even that isn't a certainty. Assistant Revenue Commissioner Terri Steenblock said it's possible that some software companies may not be able to make the changes.

"If you were to file with a vendor who had not made the changes to their system, the taxpayer would receive a notification back that says their return was not accepted," she said. "At that time, they can call the software vendor to determine is it because they didn't make the system changes or is it because there is something else wrong with the return that caused it to be rejected."

Steenblock said it's too early to say which companies can make the changes by April third.

A spokeswoman for Turbo Tax said its products will be updated. The company aims to have them ready by next week.

Anyone who qualifies for the benefits and already filed should wait until they hear from the Department of Revenue, Frans said. In many cases, the department can issue a refund without requiring an amended return, he said.

Frans said the department will either issue a refund check, tell taxpayers that they need to provide more information or tell them to amend their returns. He was not able to give a timeline on how long it will take for his department to provide refunds.

"I hate to throw out a date yet without us taking more time to really plan that but we'll try to have a ballpark date that people can start wondering why they haven't heard from us," he said. "Most of the time, people don't want to hear from the Department of Revenue but we'll try to come up with that date. We're just not ready to estimate that yet."

Some accountants say the changes are a minor inconvenience. Steve Warren, director of taxation for St. Louis Park-based Lehrman, Flom and Co., said he and other accounting firms expected the state to make the tax changes, so they've been holding back returns for people who could see benefits.

"In truth, most of our clients are not affected and those who are affected, we're holding on to them and we're letting our clients know that, yes, it may take longer to get your return filed, it may take longer to get your refund but in the end things will be done right," Warren said.

Revenue Department officials say they'll provide more updates in the coming weeks. They also plan to provide more information on changes in the law that directly affect businesses.